Mergers and Acquisitions

Date: 2018-10-26

Type of information: Company acquisition

Acquired company: Shire (UK - USA)

Acquiring company: Takeda Pharmaceutical (Japan)

Amount: $ 62 billion

Terms:

• On October 26, 2018, Takeda Pharmaceutical issued the following statement with regard to its discussions with the European Commission as part of its Phase 1 review of the proposed acquisition of Shire announced on May 8, 2018.

Takeda confirms that it is in discussions with the EC in relation to the future potential overlap in the area of inflammatory bowel disease between Takeda’s marketed product Entyvio® (vedolizumab) and Shire’s pipeline compound SHP647, which is currently in Phase III clinical trials, and has proposed a remedy of a potential divestment of SHP647 and certain associated rights.

Takeda remains committed to Entyvio®, which has been granted marketing authorization in more than 60 countries and is the cornerstone of Takeda’s diverse specialty gastrointestinal portfolio. Takeda confirms that there are no discussions with the EC regarding any other marketed products or assets in the pipeline.

Takeda does not anticipate that its discussions with the EC will result in a delay to its previously announced timetable for completion of the transaction.

• On October 18, 2018, Takeda Pharmaceutical announces that it has received unconditional clearance from the Japan Fair Trade Commission for the proposed acquisition of
Shire plc announced on May 8, 2018. The receipt of antitrust clearance in Japan is another significant step towards closing the transaction. In addition to Japan, the acquisition has now received unconditional clearances from regulatory authorities in multiple key jurisdictions, including the United States, China and Brazil, among others.

• On July 10, 2018, Takeda Pharmaceutical announced that it has received unconditional clearance from the United States Federal Trade Commission for the proposed acquisition of Shire. The acquisition remains subject to a number of conditions, including receipt of other regulatory clearances
and approval by the shareholders of both companies.

• On May 8, 2018, Takeda Pharmaceutical announced that it has reached agreement with Shire on the terms of a recommended offer pursuant to which Takeda will acquire the entire issued and to be issued ordinary share capital of Shire. Takeda and Shire have also entered into a co-operation agreement, to cooperate for the implementation of the acquisition. It is proposed that the acquisition will be effected by means of a scheme of arrangement under Article 125 of the Jersey Companies Law.

Under the terms of the acquisition, each Shire shareholder will be entitled to receive, for each Shire share,$30.33 in cash and either 0.839 New Takeda shares or 1.678 Takeda ADSs. Based on the discussion and agreement with Shire, Takeda intends to preserve the opportunity for Shire shareholders to be entitled to the benefits and synergies from the acquisition for the combined group, as described above, even after completion of the acquisition, by providing New Takeda securities as consideration for the acquisition, in addition to cash.

The acquisition terms imply an equivalent value of:

-£48.17 per Shire Share based on the closing price of ¥4,535 per Takeda Share and the exchange rates of£:¥ of 147.61 and £:$ of 1.3546 as at the Latest Practicable Date; and

-£49.01 per Shire Share based on the closing price of ¥4,923 per Takeda Share and the exchange rates of £:¥ of 1:151.51 and £:$ of 1:1.3945 on April 23, 2018 (being the day prior to the announcement that the Shire board would, in principle, be willing to recommend the consideration for the acquisition).

Takeda Pharmaceutical has entered into a “364-Day Bridge Credit Agreement” for an aggregate principal amount of up to $ 30.85 billion to finance funds necessary for the acquisition of Shire.

• On April 19, 2018, the board of Shire confirmed that it has received three conditional proposals from Takeda regarding a possible offer for the Company, on 29 March 2018, 11 April 2018 and 13 April 2018. The first proposal comprised £28 per share in new Takeda shares, to be listed in Japan and in the US through an ADR listing, and £16 per share in cash, representing a potential value of £44 per share and approximately £41 billion for the total issued and to be issued share capital of the company. Based on Takeda’s current market capitalisation, Shire shareholders would own approximately 50 per cent. of the enlarged Takeda.

Following a thorough review of the first proposal with its advisers and a board meeting on 8 April 2018, the board unanimously rejected the first proposal, concluding that it significantly undervalued the company, its growth prospects and pipeline.

The board has since received two further proposals: the second pproposal comprised £28.75 per share in new Takeda shares, to be listed in Japan and in the US through an ADR listing, and £16.75 per share in cash, representing a potential value of £45.50 per share, only a marginal increase to the first proposal, and approximately £43 billion for the total issued and to be issued share capital of the company. Based on Takeda’s current market capitalisation, Shire shareholders would own approximately 51 per cent. of the enlarged Takeda; and the third proposal also comprised £28.75 per share in new Takeda shares, to be listed in Japan and in the US through an ADR listing, and £17.75 per share in cash, representing a potential value of £46.50 per share and approximately £44 billion for the total issued and to be issued share capital of the company. Based on Takeda’s current market capitalisation, Shire shareholders would own approximately 51 per cent. of the enlarged Takeda.The Board met again and thoroughly considered the third proposal with its advisers and unanimously rejected it, concluding that it continues to significantly undervalue the company and Shire’s growth prospects and pipeline.Following the Board meeting on 14 April 2018 which rejected the third Proposal, at the Board’s request Shire’s advisers entered into a dialogue with Takeda’s advisers to discuss whether a further, more attractive, proposal may be forthcoming and to understand the basis on which such a proposal would be made

Details:

Over the past four years, Takeda has been on a transformation journey, focused on becoming an agile, R&D driven, global pharmaceutical company that is well positioned to deliver highly innovative medicines and transformative care to patients around the world. Takeda has been successful in strengthening its pipeline through increased productivity in development stages as well as collaborations with academia, biotechs and start-ups. Takeda has also revitalised its R&D engine, with 17 new molecular entity clinical products moving up to the next stage of clinical development during the past fiscal year. Takeda intends to continue to leverage the combination of internal and external innovation following
completion of Shire's acquisition.

As part of its transformation journey, Takeda has focused on developing and commercializing innovative therapies
that address unmet clinical needs in gastroenterology, oncology and neuroscience plus vaccines. Rare disease
is an evolving focus of Takeda’s R&D development strategy with more than one-third of its clinical pipeline
programs targeting rare diseases.
Takeda has a strong track record of successful cross-border M&A and post-acquisition integration, including the
acquisition of Ariad Pharmaceuticalsin 2017, Nycomed in 2011 and Millennium Pharmaceuticals in 2008.
Earlier this year, Takeda announced its proposed acquisition of TiGenix, which is expected to complete in mid
2018.

The Takeda board believes there is a compelling strategic and financial rationale for undertaking the acquisition. This operation will create a global, values-based, R&D driven biopharmaceutical leader incorporated and headquartered in
Japan, with an attractive geographic footprint and provides the scale to drive future development.

The acquisition will result in a combined group with an attractive geographic footprint and leading positions in Japan and the US, two of the largest pharmaceutical markets globally. US revenues are expected to account for close to 50 per cent. of the total revenues of the combined group. Shire’s
portfolio will also benefit from Takeda’s strong international presence in emerging markets and Japan. It will also strenghten Takeda’s presence across two of its three core therapeutic areas, and provides leading positions in
rare diseases and plasma-derived therapies.

The acquisition will accelerate Takeda’s transformation by bringing together Takeda’s and Shire’s complementary positions in gastroenterology and neuroscience. It will also provide the combined group with leading positions in rare diseases and plasma-derived therapies.

Following completion of the acquisition, Takeda will continue to focus on the acceleration of its oncology business, following its recent acquisition of Ariad Pharmaceuticals. In addition, Takeda’s vaccine business will continue to address the world’s most pressing public health needs.

Takeda expects that the combined group will derive approximately 75 per cent. of sales from five areas:
gastroenterology (GI), neuroscience, oncology and rare diseases, plus plasma-derived therapies.

Both Takeda and Shire have focused R&D efforts in the Boston area. This is further supported by Takeda’s Shonan Health Innovation Park, which is the first health innovation ecosystem in Japan.

The acquisition is expected to deliver substantial annual cost synergies of at least $1.4 billion by the end of the third fiscal year following completion of the acquisition, with the potential for additional revenue synergies from the complementary geographic and therapeutic focus.

The acquisition is expected to result in the combined group being the only pharmaceutical company listed on both the Tokyo Stock Exchange in Japan, where it will continue to have its primary listing, and the NYSE in the US, enabling it to access two of the world’s largest capital markets.

In addition to Takeda continuing to be the largest pharmaceutical company listed on the Tokyo Stock
Exchange, the acquisition will result in Takeda becoming the 8th largest company listed on the Tokyo
Stock Exchange by reference to pro forma market capitalisation as at the Latest Practicable Date.

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